Sep 02, 2004—Major German mail-order and online retailer Otto Group is examining whether the use of RFID tags on its products may help prevent shipment losses on their way to its customers. The Otto Group, which owns 123 companies and operates across Europe, North America and Asia, is the world’s largest mail-order retailer and trails only Amazon in worldwide online sales revenues.

Siemen's Kehrwald

Though only at the early stages of implementation, the technology is working well, according to Siemens AG’s Siemens Business Services, which designed the RFID installation and is responsible for managing the project.

“The initial job has been just to test the RFID hardware. We have almost completed that, and we are already getting close to 100 percent read rates—which is really excellent,” says Markus Kehrwald, senior business developer at Siemens Business Services, which is based in Munich.

The ultimate goal of the project is to test RFID in a real-life application, see if the expensive goods reach their destination more reliably when they are equipped with RFID tags and learn where product shrinkage occurs.

The first phase began in early August and has so far concentrated on ensuring that an RFID system can get accurate and reliable read rates.

By the time the trial’s first phase is over, two months from now, Otto will have manually applied smart labels to about 20,000 items at its central warehouse in Hamburg. The RFID-enabled labels, which operate at 13.56 MHz, are being placed on small, valuable goods like digital cameras or mobile phones, and then each tag is scanned and recorded.

The smart labels’ tags carry a unique article number, the shipment code and an internal return code number, but the tags contain no personal customer information. The tags are still on the goods when they are delivered to the customer, so to allay any potential consumer concerns, Otto is making sure each shipment includes a letter that explains the transponder test project and provides a telephone number to answer any questions.

So far, the tagged items are being read only inside the Otto warehouse in a secure caged area with restricted access where high-value goods are stored, picked and packed. An RFID printer-encoder stands outside the caged area producing RFID labels that are attached to items prior to entry into the secure area. The goods are scanned for the first time at a picking station, where the products are selected for shipment. Items are then loaded onto a trolley and then read as they leave the secure area en route to a packaging station. As the trial continues five tunnel readers will be deployed for the packed and labeled customer packages to pass through in the Otto distribution center. Otto’s distribution company—Hermes—will have another five tunnel readers deployed to scan the items’ arrival at Hermes’s distribution center.

According to Siemens, the secure area has metal shelving and fencing, and a metal trolley is used to move the items around. All this metal creates a harsh environment for RFID to operate in, but having established very high read rates, the company is preparing for the trial’s second stage when the tunnel readers will be deployed.

According to Siemens, if the trial goes well, there is a potential for further trials that will see RFID systems deployed in other Otto’s locations, as well as integrate the RFID networks with the companies existing IT systems.